Microsoft's Next Moves: 11 Takeaways

Microsoft's top executives spent nearly four hours Thursday explaining why the company is charging ahead with retiring CEO Steve Ballmer's "One Microsoft" plan. The remarks came during Microsoft's first financial analyst meeting in two years and touched on a number of much-discussed topics, including whether Microsoft Office will be released for the iPad and why consumers are crucial to the company's core enterprise products.

Speculation about Microsoft's next CEO has run rampant ever since Ballmer announced in August that he will retire within the next year. Nonetheless, Microsoft CFO Amy Hood put the kibosh on any such talk Thursday. "There will be no update on [the CEO selection process]," she said as the meeting began.

On Thursday, Microsoft never directly confirmed that an iPad-optimized version of Office is on the way, but company execs implied as much. "We are working away on all the things you think we should be working away on," Ballmer said, adding, "We don't have our heads in the sand."

Microsoft Applications and Services Group VP Qi Lu also dropped hints, stating that the company is working on "touch-first" editions of Office that would be available on platforms other than Windows. He noted, however, that Microsoft will do this in the way the best serves the company's financial interests; with Windows 8.1 tablets about to hit the market, in other words, it will could a while before Microsoft extends Office to the iPad.

3. Microsoft makes most of its money from large enterprises.

Microsoft Office's inevitable release for the iPad speaks to Microsoft's consumer interests -- but the company makes most of its money from large corporations and governments. These customers comprise 55% of Microsoft's business. Consumers and online services are a distant second, contributing 20%. OEMs account for another 19%, and SMBs are a surprisingly small 6%.

4. Microsoft believes consumers are essential to its enterprise business.

Ballmer said innovations in end-user computing require "the right hardware and software skills" and an understanding of both enterprise and consumer users. He also touted the importance of "the right machine learning and cloud infrastructure"-- references to Bing and Azure.

Ballmer also said that aside from Microsoft, only a few companies meet these prerequisites -- namely Google. Apple qualifies in many dimensions, Ballmer said, but lacks the investment in cloud infrastructure or machine learning. He said Facebook is one of the few others that might figure out how to monetize consumer services.

"Other than that, most of the consumer services companies just don't make enough profit to register at this scale," Ballmer continued, adding that Microsoft is uniquely positioned to "create something that might generate $30 billion, $50 billion, $100 billion of new economic value."

Consumer products don't always yield the profit margins of enterprise services. Ballmer conceded as much, noting that enterprise services and devices will fuel Microsoft's profits but that consumers are nonetheless important because their preferences bleed into the enterprise.

Turner illustrated how such consumerization trends are already impacting Microsoft's business products. Consumers have driven demand for social tools in the enterprise, which Turner said now represents a $38 billion market opportunity. He pointed out that 85% of the Fortune 500 use Yammer and 90% of the Fortune 100 use Lync. As for other enterprise focuses, Turner also touted Microsoft's advances in big data and the cloud, and Ballmer said that Windows Azure is among Microsoft's most important projects.

Microsoft recognizes that the paradigm has changed from - enterprise tells staff what they should be using (hardware and software) to - staff wanting to use what they want and enterprise adapting to it (hardware and software). Though its not a complete change (staff in the driver's seat) it has happened much more often so MS is changing its approach to make sure it stays relevant in how enterprise is reacting. There is a lot more to enterprise than big corporations - medium and smaller businesses, start ups, home based, freelancers, consultants, etc. If you want to talk proportion, then its good to know how many companies Microsoft lost to Google originally but 440 companies or entities who have returned to Microsoft and its products/services is a large shift and may indicate a trend as more businesses realize what they need to be able to operate globally and professionally. It may not matter to the small business type who is operating on a shoestring and its fine for kids in school but at the larger level you need what will work well and be positioned for the future, not just work well enough today. We'll see how Microsoft meets this challenge.Ballmer may have been the best man at the time for the job, considering all the things that Microsoft had just gone thru with the Justice Dept before Ballmer took over. How well he's done we'll see when we get some distance and evaluate what was done with what he set up and how he left things. Microsoft is in a good position for the future but it all depends on the reorg and who the next CEO is and how well they can integrate what they have and how they can read the future. Working closely with Oracle is a good move and having Nokia may have been necessary but it can fit well with future possibilities. Execution makes the difference - will they execute well or be executed (shoot themselves in the foot or others knock them off) - there in lies the question

Microsoft would be wise to hold on tight to its enterprise software prowess because the rest of its portfolio is dangling in the wind, especially mobile. Windows RT and Windows Phone merging into a phablet? Would anyone even notice? I don't see how Microsoft gains any ground in mobile, even with Nokia hardware. No company is supposed to do this much and something's got to give. Ballmer isn't leaving until next summer but after that things will get interesting. What moves do you think the new CEO will make to shake things up?

#1. Ballmer was a poor pick for CEO, don't expect anything better this time around.#2. Hundreds of millions of iOS devices shows how arrogant Microsoft has become to ignore billions in profit.#3. Corporate priority over consumers is why MS is behind on mobile and will stay behind.#4. Duh...and over the past 10 years has MS really done right by consumers? Xbox maybe?#5. Tell us something we don't know. Windows Vista was embraced better than Windows 8 by corporations.#6. Those migrating from XP now have more choices than ever. Look to higher sales of iMac and Chromebooks than Win8 PCs unless Microsoft makes Win8.5 a more Win7 compatible IU for desktop use.#7. How much of Google's income is from Android? None. MS wants what Google Play and iTunes has so much it forces Metro down consumers' throats while charging them for the privilege to do so. Can you say "consumer backlash"?#8. This author is dreaming. I don't call a 900 million right off as a benefit.#9. Another Duh... Windows Phone version what? 8? How many tries do you think MS should get but still doesn't have it right. Sure the latest is finally competitive, very competitive actually but the cows are already out in the pasture.#10. RT just confuses the market. A slightly lower cost than a Windows device with no other advantages still doesn't compete with iPad or Android tablets.#11. Office 365 will cannibalizing Office licensing for a net breakeven.

ballmer really needs to go away quickly, he is still doing damages.he seems not aware of strategic importance of windows domination, and not seeing impacts of that domination going away on ms entire product line and business plan.he wants to copy big g advertising and loud strategies and still wants to delude himself customer are running to ms as they do not want data snooped by google - do they want data snooped by ms, steve? do you really think so?one more year could be deadly to ms with such a mo...on as ceo.